Hedge funds and Private Equity - PES

2.3 Management policies and shareholder activism:
stock option programs, effects on board and CEO’s,
management fees, employee information
The investor has appointed two new members to the board: a new financial director and a
director responsible for the restructuring process. The former CEO Paul Adams, has left the
company half a year later, after helping them to develop a capital spending plan.
The investor’s strategy involves trying to rekindle interest in model railways among the young
generation. This is likely to prove difficult. Children and young people prefer to devote their leisure
time to the use of technological products – computer games and mobile phones being the current
favourites. The investor also wants to improve marketing outside Germany and to boost
sales in numerous European countries. Production and marketing are to be rationalized.
Also the corporate management contemplates opening an amusement park around the theme
of model railways. It is to be opened in 2009, when Märklin celebrates its 150 th birthday. Many
workers oppose the idea, because they believe, that it is meant as a distraction from cuts in production.
Adding to that, one earns less selling candy in an amusement park than being a skilled
worker in production. Besides there are already two amusement parks in the area and they don’t
operate profitably.
The first destination after the acquisition by the investor is the stabilization of the turnovers. The
production and the distribution should become more effective. As the first measure the sales
were strongly upgraded at own account about an online shop in the Internet and in the factoryowned
museum loading. This led to strong criticism of the specialist suppliers who saw own position
weak. After a clearing discussion the dealers from the single point-of-sales should be
incorporated in the Internet business. The toy turnover could be increased in 2006 by about 4%.
Nevertheless, 2006 was closed again with a loss.
In total the investments are increased in 2007 towards in 2006 by 50% on 15 Mil. EUR.
3. LBO exit (secondary LBO, IPO, listing)
The investor now intends to turn the company around. The result of operations has improved
already. In the first half of this year the turnover increased by 4 % to nearly € 50 million. The
orders received are 6 % higher than last year. Kingsbridge plans to keep the company for four
to six years before making its exit.
References
Wirtschaftswoche 11.12.03, p. 60f.; Märklin Presseinfo 16.12.2005, www.märklin.com; Financial Times
Deutschland 19.12.05, p. 6; Financial Times Deutschland 17.03.06, p. 7; Süddeutsche Zeitung
18/19.03.06, p. 25; Frankfurter Allgemeine Zeitung 21.03.06, p. 18; Handelsblatt 27.03.06, p. 12f. ; Süddeutsche
Zeitung 26.04.06, p. 28; Financial Times Deutschland 26.04.06, p. 7; Financial Times Deutschland
08.05.06, p. 8; Frankfurter Allgemeine Zeitung 11.05.06, p. 18; Börsenzeitung 13.05.06, p. 9;
Handelsblatt 15.05.06, p. 14; focus online. 17.05.06; Süddeutsche Zeitung 26.05.06, p. 23; Handelsblatt
16.10.06, p. 14; managermagazin 12/2006, p. 120; Financial Times Deutschland 06.12.06, p. 4; Frankfurter
Allgemeine Zeitung 07.12.06, p. 18; Frankfurter Allgemeine Zeitung 11.01.07, p. 12; Handelsblatt
11.01.06, p. 16; Süddeutsche Zeitung 11.01.06, p. 21.
Annex – 21 Case studies
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